UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-4410
Oppenheimer Discovery Fund
(Exact name of registrant as specified in charter)
6803 South Tucson Way, Centennial, Colorado 80112-3924
(Address of principal executive offices)
(Zip code)
Robert G. Zack, Esq.
OppenheimerFunds, Inc.
Two World Financial Center, New York, New York 10281-1008
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(Name and address of agent for service)
Registrant's telephone number, including area code: (303) 768-3200
--------------
Date of fiscal year end: September 30
Date of reporting period: October 1, 2003 - March 31, 2004
ITEM 1. REPORTS TO STOCKHOLDERS.
STATEMENT OF INVESTMENTS March 31, 2004 / Unaudited
- --------------------------------------------------------------------------------
MARKET VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMMON STOCKS--98.6%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--14.9%
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--5.1%
Alliance Gaming Corp. 1 191,100 $ 6,140,043
- --------------------------------------------------------------------------------
Multimedia Games, Inc. 1 305,000 7,545,700
- --------------------------------------------------------------------------------
Ruby Tuesday, Inc. 368,300 11,840,845
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Scientific Games
Corp., Cl. A 1 884,900 16,565,328
- --------------------------------------------------------------------------------
Shuffle Master, Inc. 1 61,400 2,854,486
- --------------------------------------------------------------------------------
Station Casinos, Inc. 231,900 10,243,023
--------------
55,189,425
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES--0.7%
Standard Pacific Corp. 120,000 7,200,000
- --------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS--2.1%
Marvel
Enterprises, Inc. 1 1,191,600 22,866,804
- --------------------------------------------------------------------------------
MEDIA--2.5%
Cumulus Media,
Inc., Cl. A 1 200,000 3,998,000
- --------------------------------------------------------------------------------
Entercom
Communications
Corp. 1 164,300 7,437,861
- --------------------------------------------------------------------------------
Radio One, Inc., Cl. D 1 557,800 10,319,300
- --------------------------------------------------------------------------------
TiVo, Inc. 1 611,100 5,432,679
27,187,840
- --------------------------------------------------------------------------------
SPECIALTY RETAIL--3.8%
Finish Line, Inc.
(The), Cl. A 1 205,000 7,580,900
- --------------------------------------------------------------------------------
Pacific Sunwear of
California, Inc. 1 209,700 5,146,038
- --------------------------------------------------------------------------------
Sharper Image Corp. 1 213,500 6,955,830
- --------------------------------------------------------------------------------
Tractor Supply Co. 1 194,100 7,515,552
- --------------------------------------------------------------------------------
Urban Outfitters, Inc. 1 301,000 14,466,060
--------------
41,664,380
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--0.7%
K-Swiss, Inc., Cl. A 328,600 8,040,842
- --------------------------------------------------------------------------------
CONSUMER STAPLES--0.8%
- --------------------------------------------------------------------------------
PERSONAL PRODUCTS--0.8%
NBTY, Inc. 1 230,000 8,551,400
MARKET VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
ENERGY--1.7%
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--0.7%
Maverick Tube Corp. 1 300,000 $ 7,065,000
- --------------------------------------------------------------------------------
OIL & GAS--1.0%
Chesapeake
Energy Corp. 450,000 6,030,000
- --------------------------------------------------------------------------------
Spinnaker
Exploration Co. 1 150,000 5,388,000
--------------
11,418,000
- --------------------------------------------------------------------------------
FINANCIALS--11.1%
- --------------------------------------------------------------------------------
CAPITAL MARKETS--0.9%
National Financial
Partners Corp. 302,400 9,752,400
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--4.2%
BankAtlantic
Bancorp, Inc. 200,000 3,392,000
- --------------------------------------------------------------------------------
Brookline Bancorp, Inc. 287,800 4,590,410
- --------------------------------------------------------------------------------
Independence
Community
Bank Corp. 91,300 3,720,475
- --------------------------------------------------------------------------------
Indymac Mortgage
Holdings, Inc. 200,000 7,258,000
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UCBH Holdings, Inc. 232,300 9,301,292
- --------------------------------------------------------------------------------
Westcorp 409,500 18,046,665
--------------
46,308,842
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--2.3%
CapitalSource, Inc. 1 523,900 11,761,555
- --------------------------------------------------------------------------------
Investors Financial
Services Corp. 194,100 8,020,212
- --------------------------------------------------------------------------------
Raymond James
Financial, Inc. 219,150 5,445,878
--------------
25,227,645
- --------------------------------------------------------------------------------
INSURANCE--0.6%
Bristol West
Holdings, Inc. 1 113,000 2,305,200
- --------------------------------------------------------------------------------
Direct General Corp. 105,500 3,819,100
--------------
6,124,300
11 | OPPENHEIMER DISCOVERY FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
MARKET VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
REAL ESTATE--2.3%
Government
Properties Trust, Inc. 1 153,000 $ 2,015,010
- --------------------------------------------------------------------------------
Levitt Corp., Cl. A 1 230,100 5,637,450
- --------------------------------------------------------------------------------
Luminent Mortgage
Capital, Inc. 305,000 4,315,750
- --------------------------------------------------------------------------------
Newcastle Investment
Corp. 265,500 8,947,350
- --------------------------------------------------------------------------------
Orleans
Homebuilders, Inc. 1 150,000 3,607,500
--------------
24,523,060
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--0.8%
Commercial Capital
Bancorp, Inc. 1 376,533 8,630,144
- --------------------------------------------------------------------------------
HEALTH CARE--18.4%
- --------------------------------------------------------------------------------
BIOTECHNOLOGY--7.5%
Digene Corp. 1 397,100 13,644,356
- --------------------------------------------------------------------------------
Gen-Probe, Inc. 1 473,500 15,819,635
- --------------------------------------------------------------------------------
Invitrogen Corp. 1 124,900 8,954,081
- --------------------------------------------------------------------------------
Martek Biosciences
Corp. 1 342,900 19,545,300
- --------------------------------------------------------------------------------
Medarex, Inc. 1 400,000 3,588,000
- --------------------------------------------------------------------------------
Pharmacyclics, Inc. 1 249,100 3,355,377
- --------------------------------------------------------------------------------
QLT PhotoTherapeutics,
Inc. 1 545,000 13,919,300
- --------------------------------------------------------------------------------
Renovis, Inc. 1 250,000 2,537,500
--------------
81,363,549
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--1.3%
Advanced
Neuromodulation
Systems, Inc. 1 216,600 7,817,094
- --------------------------------------------------------------------------------
BioLase Technology,
Inc. 1 276,500 4,841,515
- --------------------------------------------------------------------------------
Kyphon, Inc. 1 64,000 1,530,240
--------------
14,188,849
MARKET VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--3.3%
eResearch
Technology, Inc. 1 595,600 $ 16,706,580
- --------------------------------------------------------------------------------
Omnicare, Inc. 120,800 5,355,064
- --------------------------------------------------------------------------------
Omnicell, Inc. 1 270,000 5,348,700
- --------------------------------------------------------------------------------
Symbion, Inc. 1 20,200 366,832
- --------------------------------------------------------------------------------
United Surgical Partners
International, Inc. 1 245,200 8,322,088
--------------
36,099,264
- --------------------------------------------------------------------------------
PHARMACEUTICALS--6.3%
Able Laboratories,
Inc. 1 231,000 4,511,430
- --------------------------------------------------------------------------------
Angiotech
Pharmaceuticals, Inc. 1 444,600 10,852,686
- --------------------------------------------------------------------------------
Axcan Pharma, Inc. 1 300,000 5,718,000
- --------------------------------------------------------------------------------
DOV Pharmaceutical,
Inc. 1,2 508,600 7,893,472
- --------------------------------------------------------------------------------
Medicis
Pharmaceutical
Corp., Cl. A 175,000 7,000,000
- --------------------------------------------------------------------------------
MGI Pharma, Inc. 1 286,800 17,569,368
- --------------------------------------------------------------------------------
Penwest
Pharmaceuticals Co. 1 302,000 4,412,220
- --------------------------------------------------------------------------------
Taro Pharmaceutical
Industries Ltd. 1 184,300 10,687,557
--------------
68,644,733
- --------------------------------------------------------------------------------
INDUSTRIALS--9.2%
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--3.5%
Corinthian
Colleges, Inc. 1 708,400 23,419,704
- --------------------------------------------------------------------------------
Corporate Executive
Board Co. 109,600 5,151,200
- --------------------------------------------------------------------------------
Gevity HR, Inc. 290,200 8,473,840
- --------------------------------------------------------------------------------
Universal Technical
Institute, Inc. 1 36,800 1,473,840
--------------
38,518,584
12 | OPPENHEIMER DISCOVERY FUND
MARKET VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
MACHINERY--1.9%
Ceradyne, Inc. 1 184,700 $ 6,676,905
- --------------------------------------------------------------------------------
Nordson Corp. 235,500 8,821,830
- --------------------------------------------------------------------------------
Pall Corp. 258,600 5,867,634
--------------
21,366,369
- --------------------------------------------------------------------------------
ROAD & RAIL--3.1%
Hunt (J.B.) Transport
Services, Inc. 1 326,500 9,197,505
- --------------------------------------------------------------------------------
Landstar System, Inc. 1 164,400 6,730,536
- --------------------------------------------------------------------------------
Pacer International,
Inc. 1 495,900 10,929,636
- --------------------------------------------------------------------------------
Yellow
Roadway Corp. 1 200,900 6,764,303
--------------
33,621,980
- --------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS--0.7%
MSC Industrial
Direct Co., Inc., Cl. A 246,100 7,370,695
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INFORMATION TECHNOLOGY--40.7%
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--5.7%
ADTRAN, Inc. 334,600 10,048,038
- --------------------------------------------------------------------------------
Airspan Networks,
Inc. 1 525,000 3,066,000
- --------------------------------------------------------------------------------
Carrier Access Corp. 1 375,600 4,582,320
- --------------------------------------------------------------------------------
Ditech
Communications
Corp. 1 200,000 3,334,000
- --------------------------------------------------------------------------------
F5 Networks, Inc. 1 276,900 9,373,065
- --------------------------------------------------------------------------------
Polycom, Inc. 1 468,500 9,946,255
- --------------------------------------------------------------------------------
Powerwave
Technologies, Inc. 1 558,900 4,359,420
- --------------------------------------------------------------------------------
REMEC, Inc. 1 526,500 4,001,400
- --------------------------------------------------------------------------------
Sierra Wireless, Inc. 1 170,000 6,203,300
- --------------------------------------------------------------------------------
UTStarcom, Inc. 1 247,300 7,112,348
--------------
62,026,146
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--2.2%
Advanced Digital
Information Corp. 1 309,000 3,516,420
- --------------------------------------------------------------------------------
Lexar Media, Inc. 1 644,500 10,672,920
- --------------------------------------------------------------------------------
SanDisk Corp. 1 334,200 9,481,254
--------------
23,670,594
MARKET VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--4.8%
Aeroflex, Inc. 1 940,000 $ 12,652,400
- --------------------------------------------------------------------------------
Amphenol Corp.,
Cl. A 1 420,000 12,474,000
- --------------------------------------------------------------------------------
Merix Corp. 1 229,300 4,230,585
- --------------------------------------------------------------------------------
Plexus Corp. 1 284,600 5,063,034
- --------------------------------------------------------------------------------
Staktek
Holdings, Inc. 1 58,800 720,300
- --------------------------------------------------------------------------------
TTM
Technologies, Inc. 1 450,000 5,544,000
- --------------------------------------------------------------------------------
Vishay
Intertechnology, Inc. 1 539,100 11,504,394
--------------
52,188,713
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--5.9%
autobytel.com, inc. 1 451,200 5,955,840
- --------------------------------------------------------------------------------
Digital River, Inc. 1 509,500 11,927,395
- --------------------------------------------------------------------------------
Digitas, Inc. 1 399,600 4,111,884
- --------------------------------------------------------------------------------
eCollege.com, Inc. 1 472,900 9,874,152
- --------------------------------------------------------------------------------
National Information
Consortium, Inc. 1 467,200 2,821,888
- --------------------------------------------------------------------------------
Netease.com,
Inc., ADR 1 156,400 7,787,156
- --------------------------------------------------------------------------------
Openwave
Systems, Inc. 1 149,600 1,995,664
- --------------------------------------------------------------------------------
SINA Corp. 1 182,000 6,885,060
- --------------------------------------------------------------------------------
SupportSoft, Inc. 1 637,900 7,023,279
- --------------------------------------------------------------------------------
VeriSign, Inc. 1 324,100 5,376,819
--------------
63,759,137
- --------------------------------------------------------------------------------
IT SERVICES--1.4%
Aquantive, Inc. 1 500,000 4,800,000
- --------------------------------------------------------------------------------
Cognizant
Technology
Solutions Corp. 1 222,600 10,072,650
--------------
14,872,650
- --------------------------------------------------------------------------------
OFFICE ELECTRONICS--1.0%
Zebra Technologies
Corp., Cl. A 1 165,400 11,473,798
13 | OPPENHEIMER DISCOVERY FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
MARKET VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
SEMICONDUCTORS &
SEMICONDUCTOR EQUIPMENT--10.9%
AMIS Holdings, Inc. 1 175,900 $ 2,854,857
- --------------------------------------------------------------------------------
Amkor
Technology, Inc. 1 423,900 6,201,657
- --------------------------------------------------------------------------------
Atheros
Communications, Inc. 1 28,600 489,346
- --------------------------------------------------------------------------------
ATI Technologies, Inc. 1 457,900 7,463,770
- --------------------------------------------------------------------------------
ATMI, Inc. 1 500,000 13,160,000
- --------------------------------------------------------------------------------
Cypress
Semiconductor Corp. 1 291,200 5,960,864
- --------------------------------------------------------------------------------
Exar Corp. 1 438,100 8,104,850
- --------------------------------------------------------------------------------
LTX Corp. 1 527,800 7,969,780
- --------------------------------------------------------------------------------
Marvell Technology
Group Ltd. 1 398,000 17,929,900
- --------------------------------------------------------------------------------
Microsemi Corp. 1 433,800 5,934,384
- --------------------------------------------------------------------------------
OmniVision
Technologies, Inc. 1 399,200 10,902,152
- --------------------------------------------------------------------------------
ON Semiconductor
Corp. 1 986,300 7,436,702
- --------------------------------------------------------------------------------
Silicon
Laboratories, Inc. 1 150,000 7,932,000
- --------------------------------------------------------------------------------
Silicon Storage
Technology, Inc. 1 656,100 8,489,934
- --------------------------------------------------------------------------------
Skyworks
Solutions, Inc. 1 400,000 4,664,000
- --------------------------------------------------------------------------------
TriQuint
Semiconductor, Inc. 1 500,000 3,650,000
--------------
119,144,196
- --------------------------------------------------------------------------------
SOFTWARE--8.8%
Activision, Inc. 1 816,750 12,920,985
- --------------------------------------------------------------------------------
Altiris, Inc. 1 563,100 15,733,014
- --------------------------------------------------------------------------------
Autodesk, Inc. 450,000 14,229,000
- --------------------------------------------------------------------------------
FactSet Research
Systems, Inc. 200,000 8,512,000
MARKET VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
SOFTWARE Continued
Fair Isaac Corp. 282,450 $ 10,190,796
- --------------------------------------------------------------------------------
FileNet Corp. 1 382,900 10,204,285
- --------------------------------------------------------------------------------
InterVoice-Brite, Inc. 1 256,600 4,328,842
- --------------------------------------------------------------------------------
Macromedia, Inc. 1 520,000 10,436,400
- --------------------------------------------------------------------------------
Magma Design
Automation, Inc. 1 446,300 9,332,133
--------------
95,887,455
- --------------------------------------------------------------------------------
MATERIALS--1.1%
- --------------------------------------------------------------------------------
METALS & MINING--1.1%
GrafTech
International Ltd. 1 590,200 8,823,490
- --------------------------------------------------------------------------------
Steel Technologies, Inc. 195,700 3,780,923
--------------
12,604,413
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--0.7%
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--0.7%
Wireless Facilities, Inc. 1 700,000 7,707,000
--------------
Total Common Stocks
(Cost $876,651,226) 1,074,258,207
- --------------------------------------------------------------------------------
PREFERRED STOCKS--0.0%
- --------------------------------------------------------------------------------
Candescent
Technologies Corp.:
$2.50 Cv., Series
D, Vtg. 1,2 1,200,000 --
Sr. Exchangeable,
Series E, Vtg. 1,2 800,000 --
Sr. Exchangeable,
Series F, Vtg. 1,2 200,000 --
--------------
Total Preferred Stocks
(Cost $8,900,000) --
14 | OPPENHEIMER DISCOVERY FUND
MARKET VALUE
UNITS SEE NOTE 1
- --------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.1%
Discovery Laboratories,
Inc. Wts., Exp. 9/20/10 1,2
(Cost $0) 123,908 $ 1,140,459
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--0.2%
- --------------------------------------------------------------------------------
Undivided interest of 0.388% in joint repurchase
agreement (Principal Amount/Market Value
$422,774,000, with a maturity value of
$422,786,096) with PaineWebber, Inc.,
1.03%, dated 3/31/04, to be repurchased
at $1,641,047 on 4/1/04, collateralized
by Federal National Mortgage Assn.,
4.50%, 3/1/34, with a value of
$431,770,045
(Cost $1,641,000) $ 1,641,000 1,641,000
PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS,
AT VALUE
(COST $887,192,226) 98.9% $1,077,039,666
- --------------------------------------------------------------------------------
OTHER ASSETS NET
OF LIABILITIES 1.1 12,149,264
--------------------------------
NET ASSETS 100.0% $1,089,188,930
================================
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. Identifies issues considered to be illiquid or restricted. See Note 5 of
Notes to Financial Statements.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
15 | OPPENHEIMER DISCOVERY FUND
STATEMENT OF ASSETS AND LIABILITIES Unaudited
- --------------------------------------------------------------------------------
March 31, 2004
- -----------------------------------------------------------------------------------
ASSETS
- -----------------------------------------------------------------------------------
Investments, at value (cost $887,192,226)--see accompanying
statement of investments $1,077,039,666
- -----------------------------------------------------------------------------------
Cash 439,394
- -----------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 43,702,175
Interest and dividends 176,375
Other 22,129
---------------
Total assets 1,121,379,739
- -----------------------------------------------------------------------------------
LIABILITIES
- -----------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 22,644,387
Shares of beneficial interest redeemed 7,963,047
Distribution and service plan fees 640,206
Shareholder communications 375,620
Transfer and shareholder servicing agent fees 321,106
Trustees' compensation 233,461
Other 12,982
---------------
Total liabilities 32,190,809
- -----------------------------------------------------------------------------------
NET ASSETS $1,089,188,930
===============
- -----------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- -----------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 25,611
- -----------------------------------------------------------------------------------
Additional paid-in capital 1,131,745,229
- -----------------------------------------------------------------------------------
Accumulated net investment loss (7,153,368)
- -----------------------------------------------------------------------------------
Accumulated net realized loss on investments (225,275,982)
- -----------------------------------------------------------------------------------
Net unrealized appreciation on investments 189,847,440
---------------
NET ASSETS $1,089,188,930
===============
16 | OPPENHEIMER DISCOVERY FUND
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- --------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$803,382,639 and 18,561,613 shares of beneficial interest outstanding) $43.28
Maximum offering price per share (net asset value plus sales charge of
5.75% of offering price) $45.92
- --------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net
assets of $159,242,990 and 4,073,047 shares of beneficial interest
outstanding) $39.10
- --------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net
assets of $52,021,584 and 1,303,454 shares of beneficial interest
outstanding) $39.91
- --------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net
assets of $7,642,211 and 178,138 shares of beneficial interest
outstanding) $42.90
- --------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based
on net assets of $66,899,506 and 1,494,521 shares of beneficial
interest outstanding) $44.76
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17 | OPPENHEIMER DISCOVERY FUND
STATEMENT OF OPERATIONS Unaudited
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2004
- -----------------------------------------------------------------------------------
INVESTMENT INCOME
- -----------------------------------------------------------------------------------
Dividends $ 952,956
- -----------------------------------------------------------------------------------
Interest 13,650
-------------
Total investment income 966,606
- -----------------------------------------------------------------------------------
EXPENSES
- -----------------------------------------------------------------------------------
Management fees 3,739,483
- -----------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 988,017
Class B 828,955
Class C 258,693
Class N 14,795
- -----------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 1,325,054
Class B 348,836
Class C 113,997
Class N 16,883
Class Y 84,915
- -----------------------------------------------------------------------------------
Shareholder communications:
Class A 71,981
Class B 36,053
Class C 5,545
Class N 478
- -----------------------------------------------------------------------------------
Custodian fees and expenses 41,890
- -----------------------------------------------------------------------------------
Trustees' compensation 29,185
- -----------------------------------------------------------------------------------
Other 79,314
-------------
Total expenses 7,984,074
Less reduction to custodian expenses (164)
Less voluntary waiver of transfer and shareholder servicing
agent fees:
Class B (48,051)
Class C (20,043)
Class N (6,141)
-------------
Net expenses 7,909,675
- -----------------------------------------------------------------------------------
NET INVESTMENT LOSS (6,943,069)
- -----------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- -----------------------------------------------------------------------------------
Net realized gain on investments 157,791,498
- -----------------------------------------------------------------------------------
Net change in unrealized appreciation on investments (34,585,573)
- -----------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $116,262,856
=============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18 | OPPENHEIMER DISCOVERY FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
MARCH 31, 2004 SEPTEMBER 30,
(UNAUDITED) 2003
- ---------------------------------------------------------------------------------------
OPERATIONS
- ---------------------------------------------------------------------------------------
Net investment loss $ (6,943,069) $ (8,510,499)
- ---------------------------------------------------------------------------------------
Net realized gain 157,791,498 39,668,785
Net change in unrealized appreciation (depreciation) (34,585,573) 247,132,042
---------------------------------
Net increase in net assets resulting from operations 116,262,856 278,290,328
- ---------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ---------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
beneficial interest transactions:
Class A (55,596,252) (6,160,217)
Class B (19,145,967) (39,188,474)
Class C (1,557,971) 1,553,417
Class N 2,703,101 1,104,042
Class Y 3,552,544 4,517,889
- ---------------------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------------------------
Total increase 46,218,311 240,116,985
- ---------------------------------------------------------------------------------------
Beginning of period 1,042,970,619 802,853,634
---------------------------------
End of period (including accumulated net investment
loss of $7,153,368 and $210,299, respectively) $1,089,188,930 $1,042,970,619
=================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19 | OPPENHEIMER DISCOVERY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
MARCH 31, 2004 SEPT. 30,
CLASS A (UNAUDITED) 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ---------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $38.81 $28.24 $33.08 $66.77 $43.26 $40.12
- ---------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.20) (.26) (.22) (.19) (.32) (.28)
Net realized and unrealized gain (loss) 4.67 10.83 (4.62) (20.66) 26.72 4.84
------------------------------------------------------------
Total from investment operations 4.47 10.57 (4.84) (20.85) 26.40 4.56
- ---------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Distributions from net realized gain -- -- -- (12.84) (2.89) (1.42)
- ---------------------------------------------------------------------------------------------------------
Net asset value, end of period $43.28 $38.81 $28.24 $33.08 $66.77 $43.26
============================================================
- ---------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 11.52% 37.43% (14.63)% (37.01)% 62.15% 11.59%
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $803,383 $772,420 $572,843 $754,082 $1,286,298 $750,394
- ---------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $816,925 $639,170 $753,304 $988,717 $1,176,289 $875,057
- ---------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment loss (1.11)% (0.83)% (0.74)% (0.31)% (0.47)% (0.69)%
Total expenses 1.28% 1.41% 1.45% 1.25% 1.15% 1.31%
Expenses after expense reimbursement
or fee waiver and reduction to
custodian expenses N/A 3 1.35% 1.42% N/A 3 N/A 3 N/A 3
- ---------------------------------------------------------------------------------------------------------
Portfolio turnover rate 82% 172% 143% 155% 224% 73%
<FN>
1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.
</FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20 | OPPENHEIMER DISCOVERY FUND
SIX MONTHS YEAR
ENDED ENDED
MARCH 31, 2004 SEPT. 30,
CLASS B (UNAUDITED) 2003 2002 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $35.21 $25.81 $30.46 $62.99 $41.22 $38.58
- ----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.72) (1.09) (.91) (.29) (.47) (.85)
Net realized and unrealized gain (loss) 4.61 10.49 (3.74) (19.40) 25.13 4.91
-------------------------------------------------------------
Total from investment operations 3.89 9.40 (4.65) (19.69) 24.66 4.06
- ----------------------------------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:
Distributions from net realized gain -- -- -- (12.84) (2.89) (1.42)
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $39.10 $35.21 $25.81 $30.46 $62.99 $41.22
=============================================================
- ----------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 11.05% 36.42% (15.27)% (37.48)% 60.95% 10.73%
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $159,243 $160,851 $154,657 $234,023 $423,689 $224,710
- ----------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $165,629 $148,410 $223,215 $315,607 $371,643 $257,146
- ----------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment loss (1.93)% (1.56)% (1.50)% (1.07)% (1.22)% (1.45)%
Total expenses 2.16% 2.35% 2.21% 2.01% 1.90% 2.07%
Expenses after expense reimbursement
or fee waiver and reduction to
custodian expenses 2.10% 2.10% 2.18% N/A 3 N/A 3 N/A 3
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 82% 172% 143% 155% 224% 73%
<FN>
1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.
</FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21 | OPPENHEIMER DISCOVERY FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
MARCH 31, 2004 SEPT. 30,
CLASS C (UNAUDITED) 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ---------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $35.93 $26.34 $31.10 $64.00 $41.85 $39.15
- ---------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.42) (.44) (.59) (.24) (.24) (.85)
Net realized and unrealized gain (loss) 4.40 10.03 (4.17) (19.82) 25.28 4.97
------------------------------------------------------------
Total from investment operations 3.98 9.59 (4.76) (20.06) 25.04 4.12
- ---------------------------------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:
Distributions from net realized gain -- -- -- (12.84) (2.89) (1.42)
- ---------------------------------------------------------------------------------------------------------
Net asset value, end of period $39.91 $35.93 $26.34 $31.10 $64.00 $41.85
============================================================
- ---------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 11.08% 36.41% (15.31)% (37.47)% 60.95% 10.73%
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $52,022 $48,263 $34,673 $44,404 $70,140 $27,413
- ---------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $51,715 $38,930 $45,655 $56,301 $55,205 $31,971
- ---------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment loss (1.91)% (1.58)% (1.50)% (1.07)% (1.20)% (1.45)%
Total expenses 2.16% 2.38% 2.21% 2.01% 1.90% 2.07%
Expenses after expense reimbursement
or fee waiver and reduction to
custodian expenses 2.08% 2.12% 2.18% N/A 3 N/A 3 N/A 3
- ---------------------------------------------------------------------------------------------------------
Portfolio turnover rate 82% 172% 143% 155% 224% 73%
<FN>
1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.
</FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22 | OPPENHEIMER DISCOVERY FUND
SIX MONTHS YEAR
ENDED ENDED
MARCH 31, 2004 SEPT. 30,
CLASS N (UNAUDITED) 2003 2002 2001 1
- ---------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ---------------------------------------------------------------------------------------------
Net asset value, beginning of period $38.53 $28.11 $33.01 $39.11
- ---------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.27) (.35) (.30) (.13)
Net realized and unrealized gain (loss) 4.64 10.77 (4.60) (5.97)
----------------------------------------
Total from investment operations 4.37 10.42 (4.90) (6.10)
- ---------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Distributions from net realized gain -- -- -- --
- ---------------------------------------------------------------------------------------------
Net asset value, end of period $42.90 $38.53 $28.11 $33.01
========================================
- ---------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 11.34% 37.07% (14.84)% (15.60)%
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $7,642 $4,363 $2,236 $147
- ---------------------------------------------------------------------------------------------
Average net assets (in thousands) $5,953 $3,088 $1,786 $105
- ---------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment loss (1.40)% (1.13)% (0.97)% (0.93)%
Total expenses 1.79% 2.12% 1.68% 1.55%
Expenses after expense reimbursement or fee
waiver and reduction to custodian expenses 1.58% 1.65% 1.65% N/A 4
- ---------------------------------------------------------------------------------------------
Portfolio turnover rate 82% 172% 143% 155%
<FN>
1. For the period from March 1, 2001 (inception of offering) to September 30,
2001.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
</FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23 | OPPENHEIMER DISCOVERY FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
MARCH 31, 2004 SEPT. 30,
CLASS Y (UNAUDITED) 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ---------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $40.07 $29.08 $33.96 $68.06 $43.92 $40.63
- ---------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.23) (.26) (.06) (.17) (.30) (.17)
Net realized and unrealized gain (loss) 4.92 11.25 (4.82) (21.09) 27.33 4.88
------------------------------------------------------------
Total from investment operations 4.69 10.99 (4.88) (21.26) 27.03 4.71
- ---------------------------------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:
Distributions from net realized gain -- -- -- (12.84) (2.89) (1.42)
- ---------------------------------------------------------------------------------------------------------
Net asset value, end of period $44.76 $40.07 $29.08 $33.96 $68.06 $43.92
============================================================
- ---------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 11.70% 37.79% (14.37)% (36.88)% 62.68% 11.82%
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $66,900 $57,074 $38,444 $50,125 $87,131 $39,189
- ---------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $64,870 $43,531 $50,275 $64,264 $76,635 $40,649
- ---------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment loss (0.77)% (0.57)% (0.43)% (0.13)% (0.11)% (0.48)%
Total expenses 0.96% 1.16% 1.26% 1.14% 0.80% 1.11%
Expenses after expense reimbursement
or fee waiver and reduction to
custodian expenses N/A 3 1.10% 1.11% 1.06% N/A 3 N/A 3
- ---------------------------------------------------------------------------------------------------------
Portfolio turnover rate 82% 172% 143% 155% 224% 73%
<FN>
1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.
</FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24 | OPPENHEIMER DISCOVERY FUND
NOTES TO FINANCIAL STATEMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Discovery Fund (the Fund) is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund's investment objective is to seek capital appreciation. The Fund's
investment advisor is OppenheimerFunds, Inc. (the Manager).
The Fund offers Class A, Class B, Class C, Class N and Class Y shares. Class
A shares are sold at their offering price, which is normally net asset value
plus a front-end sales charge. Class B, Class C and Class N shares are sold
without a front-end sales charge but may be subject to a contingent deferred
sales charge (CDSC). Class N shares are sold only through retirement plans.
Retirement plans that offer Class N shares may impose charges on those
accounts. Class Y shares are sold to certain institutional investors without
either a front-end sales charge or a CDSC. All classes of shares have identical
rights and voting privileges with respect to the Fund in general and exclusive
voting rights on matters that affect that class alone. Earnings, net assets and
net asset value per share may differ by minor amounts due to each class having
its own expenses directly attributable to that class. Classes A, B, C and N
have separate distribution and/or service plans. No such plan has been adopted
for Class Y shares. Class B shares will automatically convert to Class A shares
six years after the date of purchase. The Fund assesses a 2% fee on the
proceeds of fund shares that are redeemed (either by selling or exchanging to
another Oppenheimer fund) within 30 days of their purchase. The fee, which is
retained by the Fund, is accounted for as an addition to paid-in capital.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. Securities listed or traded on National Stock Exchanges
or other domestic or foreign exchanges are valued based on the last sale price
of the security traded on that exchange prior to the time when the Fund's
assets are valued. Securities traded on NASDAQ are valued based on the closing
price provided by NASDAQ prior to the time when the Fund's assets are valued.
In the absence of a sale, the security is valued at the last sale price on the
prior trading day, if it is within the spread of the closing bid and asked
prices, and if not, at the closing bid price. Securities may be valued
primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities (including restricted
securities) for which market quotations are not readily available are valued at
their fair value. Foreign securities whose values have been materially affected
by what the Manager identifies as a significant event occurring before the
Fund's assets are valued but after the close of their respective foreign
exchanges will be fair valued. Fair value is determined in good faith using
consistently applied procedures under the supervision of the Board of Trustees.
Short-term "money market type" debt securities with remaining maturities of
sixty days or less are valued at amortized cost (which approximates market
value).
25 | OPPENHEIMER DISCOVERY FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint
trading accounts on a daily basis. Secured by U.S. government securities, these
balances are invested in one or more repurchase agreements. Securities pledged
as collateral, for repurchase agreements are held by a custodian bank until the
agreements mature. Each agreement requires that the market value of the
collateral be sufficient to cover payments of interest and principal. In the
event of default by the other party to the agreement, retention of the
collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund.
As of March 31, 2004, the Fund had available for federal income tax purposes
an estimated unused capital loss carryforward of $221,624,837 expiring by 2011.
This estimated capital loss carryforward represents carryforward as of the end
of the last fiscal year, increased for losses deferred under tax accounting
rules to the current fiscal year and is increased or decreased by capital
losses or gains realized in the first six months of the current fiscal year.
During the six months ended March 31, 2004 and the year ended September 30,
2003, the Fund used $157,791,498 and $0, respectively, of carryforward to
offset capital gains realized.
As of September 30, 2003, the Fund had available for federal income tax
purposes unused capital loss carryforwards as follows:
EXPIRING
----------------------
2009 $ 12,201,695
2010 258,482,944
2011 108,731,696
------------
Total $379,416,335
============
26 | OPPENHEIMER DISCOVERY FUND
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Fund has adopted an unfunded retirement plan for
the Fund's independent trustees. Benefits are based on years of service and
fees paid to each trustee during the years of service. During the six months
ended March 31, 2004, the Fund's projected benefit obligations were increased
by $9,615 and payments of $16,116 were made to retired trustees, resulting in
an accumulated liability of $205,954 as of March 31, 2004.
The Board of Trustees has adopted a deferred compensation plan for
independent trustees, that enables trustees to elect to defer receipt of all or
a portion of the annual compensation they are entitled to receive from the
Fund. Under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or are invested in other
Oppenheimer funds selected by the Trustee. Deferral of trustees' fees under the
plan will not affect the net assets of the Fund, and will not materially affect
the Fund's assets, liabilities or net investment income per share. Amounts will
be deferred until distributed in accordance to the Plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income and capital gain distributions, if
any, are declared and paid annually.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and
amortization of premium, is accrued as earned.
- --------------------------------------------------------------------------------
EXPENSE OFFSET ARRANGEMENT. The reduction of custodian fees, if applicable,
represents earnings on cash balances maintained by the Fund.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.
27 | OPPENHEIMER DISCOVERY FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:
SIX MONTHS ENDED MARCH 31, 2004 YEAR ENDED SEPTEMBER 30, 2003
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------
CLASS A
Sold 2,066,777 $ 87,859,712 10,030,343 $ 315,000,736
Redeemed (3,405,615) (143,455,964) (10,414,246) (321,160,953)
--------------------------------------------------------------
Net decrease (1,338,838) $ (55,596,252) (383,903) $ (6,160,217)
==============================================================
- ------------------------------------------------------------------------------------------
CLASS B
Sold 432,090 $ 16,668,123 970,285 $ 29,163,211
Redeemed (927,924) (35,814,090) (2,394,220) (68,351,685)
--------------------------------------------------------------
Net decrease (495,834) $ (19,145,967) (1,423,935) $ (39,188,474)
==============================================================
- ------------------------------------------------------------------------------------------
CLASS C
Sold 180,896 $ 7,131,626 553,181 $ 17,200,866
Redeemed (220,538) (8,689,597) (526,300) (15,647,449)
--------------------------------------------------------------
Net increase (decrease) (39,642) $ (1,557,971) 26,881 $ 1,553,417
==============================================================
- ------------------------------------------------------------------------------------------
CLASS N
Sold 89,497 $ 3,760,452 60,881 $ 2,008,924
Redeemed (24,602) (1,057,351) (27,175) (904,882)
--------------------------------------------------------------
Net increase 64,895 $ 2,703,101 33,706 $ 1,104,042
==============================================================
- ------------------------------------------------------------------------------------------
CLASS Y
Sold 556,242 $ 24,713,517 613,815 $ 21,921,802
Redeemed (485,959) (21,160,973) (511,507) (17,403,913)
--------------------------------------------------------------
Net increase 70,283 $ 3,552,544 102,308 $ 4,517,889
==============================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the six months ended March 31, 2004, were
$897,710,725 and $975,042,424, respectively.
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with
the investment advisory agreement with the Fund which provides for a fee at an
annual rate of 0.75% of the first $200 million of average annual net assets,
0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the
next $200 million, 0.60% of the next $700 million, and 0.58% of average annual
net assets in excess of $1.5 billion.
28 | OPPENHEIMER DISCOVERY FUND
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the
Manager, acts as the transfer and shareholder servicing agent for the Fund. The
Fund pays OFS a per account fee. For the six months ended March 31, 2004, the
Fund paid $1,855,038 to OFS for services to the Fund.
Additionally, Class Y shares are subject to minimum fees of $5,000 for
assets of less than $10 million and $10,000 for assets of $10 million or more.
The Class Y shares are subject to the minimum fees in the event that the per
account fee does not equal or exceed the applicable minimum fees. OFS may
voluntarily waive the minimum fees.
OFS has voluntarily agreed to limit transfer and shareholder servicing agent
fees up to an annual rate of 0.35% of average annual net assets for all
classes. This undertaking may be amended or withdrawn at any time.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN (12B-1) FEES. Under its General Distributor's
Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor)
acts as the Fund's principal underwriter in the continuous public offering of
the Fund's classes of shares.
- --------------------------------------------------------------------------------
SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for Class
A shares. It reimburses the Distributor for a portion of its costs incurred for
services provided to accounts that hold Class A shares. Reimbursement is made
quarterly at an annual rate of up to 0.25% of the average annual net assets of
Class A shares of the Fund. The Distributor currently uses the fees it receives
from the Fund to pay brokers, dealers and other financial institutions for
personal services and account maintenance services they provide for their
customers who hold Class A shares. Any unreimbursed expenses the Distributor
incurs with respect to Class A shares in any fiscal year cannot be recovered in
subsequent years. Fees incurred by the Fund under the plan are detailed in the
Statement of Operations.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The
Fund has adopted Distribution and Service Plans for Class B, Class C and Class
N shares to compensate the Distributor for its services in connection with the
distribution of these shares and servicing accounts. Under the plans, the Fund
pays the Distributor an annual asset-based sales charge of 0.75% per year on
Class B shares and on Class C shares and 0.25% per year on Class N shares. The
Distributor also receives a service fee of up to 0.25% per year under each
plan. If either the Class B, Class C or Class N plan is terminated by the Fund
or by the shareholders of a class, the Board of Trustees and its independent
trustees must determine whether the Distributor shall be entitled to payment
from the Fund of all or a portion of the service fee and/or asset-based sales
charge in respect to shares sold prior to the effective date of such
termination. The Distributor's aggregate uncompensated expenses under the plan
at March 31, 2004 for Class B, Class C and Class N shares were $4,933,050,
$1,141,050 and $73,396, respectively. Fees incurred by the Fund under the plans
are detailed in the Statement of Operations.
29 | OPPENHEIMER DISCOVERY FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
SALES CHARGES. Front-end sales charges and contingent deferred sales charges
(CDSC) do not represent expenses of the Fund. They are deducted from the
proceeds of sales of Fund shares prior to investment or from redemption
proceeds prior to remittance, as applicable. The sales charges retained by the
Distributor from the sale of shares and the CDSC retained by the Distributor on
the redemption of shares is shown in the table below for the period indicated.
CLASS A CLASS B CLASS C CLASS N
CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT
FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES
SIX MONTHS RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- -----------------------------------------------------------------------------------------------
March 31, 2004 $151,045 $3,991 $158,443 $7,467 $1,267
- --------------------------------------------------------------------------------
5. ILLIQUID OR RESTRICTED SECURITIES
As of March 31, 2004, investments in securities included issues that are
illiquid or restricted. Restricted securities are purchased in private
placement transactions, are not registered under the Securities Act of 1933,
may have contractual restrictions on resale, and are valued under methods
approved by the Board of Trustees as reflecting fair value. A security may also
be considered illiquid if it lacks a readily available market or if its
valuation has not changed for a certain period of time. The Fund intends to
invest no more than 10% of its net assets (determined at the time of purchase
and reviewed periodically) in illiquid or restricted securities. Certain
restricted securities, eligible for resale to qualified institutional
investors, are not subject to that limitation. The aggregate value of illiquid
or restricted securities subject to this limitation as of March 31, 2004 was
$9,033,931, which represents 0.83% of the Fund's net assets, all of which are
considered restricted. Information concerning restricted securities is as
follows:
VALUATION UNREALIZED
AS OF APPRECIATION
SECURITY ACQUISITION DATES COST MARCH 31, 2004 (DEPRECIATION)
- --------------------------------------------------------------------------------------------------------
STOCKS AND/OR WARRANTS
Candescent Technologies Corp.,
$2.50 Cv., Series D, Vtg. 3/31/95 $3,000,000 $ -- $(3,000,000)
Candescent Technologies Corp.,
Sr. Exchangeable, Series E, Vtg. 4/24/96 4,400,000 -- (4,400,000)
Candescent Technologies Corp.,
Sr. Exchangeable, Series F, Vtg. 6/11/97 1,500,000 -- (1,500,000)
Discovery Laboratories, Inc. Wts.,
Exp. 9/20/10 6/18/03 -- 1,140,459 1,140,459
DOV Pharmaceutical, Inc. 8/29/02-1/15/04 3,827,222 7,893,472 4,066,250
30 | OPPENHEIMER DISCOVERY FUND
- --------------------------------------------------------------------------------
6. BORROWING AND LENDING ARRANGEMENTS
The Fund entered into an "interfund borrowing and lending arrangement" with
other funds in the Oppenheimer funds complex, to allow funds to borrow for
liquidity purposes. The arrangement was initiated pursuant to exemptive relief
granted by the Securities and Exchange Commission (the SEC) to allow these
affiliated funds to lend money to, and borrow money from, each other, in an
attempt to reduce borrowing costs below those of bank loan facilities. The
SEC's order requires the Fund's Board of Trustees to adopt operating policies
and procedures to administer interfund borrowing and lending. Under the
arrangement the Fund may lend money to other Oppenheimer funds and may borrow
from other Oppenheimer funds at a rate set by the Fund's Board of Trustees,
based upon a recommendation by the Manager. The Fund's borrowings, if any, are
subject to asset coverage requirements under the Investment Company Act and the
provisions of the SEC order and other applicable regulations. If the Fund
borrows money, there is a risk that the loan could be called on one day's
notice, in which case the Fund might have to borrow from a bank at higher rates
if a loan were not available from another Oppenheimer fund. If the Fund lends
money to another fund, it will be subject to the risk that the other fund might
not repay the loan in a timely manner, or at all.
The Fund had no interfund borrowings or loans outstanding during the six
months ended or at March 31, 2004.
- --------------------------------------------------------------------------------
PORTFOLIO PROXY VOTING
POLICIES AND PROCEDURES Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and
Procedures is available (i) without charge, upon request, by calling the Fund
toll-free at 1.800.225.5677, (ii) on the Fund's website at
www.oppenheimerfunds.com, and (iii) on the SEC's website at www.sec.gov. In
addition, the Fund will be required to file new Form N-PX, with its complete
proxy voting record for the 12 months ended June 30th, no later than August
31st of each year. The first such filing is due no later than August 31, 2004,
for the twelve months ended June 30, 2004. Once filed, the Fund's Form N-PX
filing will be available (i) without charge, upon request, by calling the Fund
toll-free at 1.800.225.5677, and (ii) on the SEC's website at www.sec.gov.
31 | OPPENHEIMER DISCOVERY FUND
ITEM 2. CODE OF ETHICS
The registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer, principal
accounting officer or controller or persons performing similar functions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
The Board of Trustees of the registrant has determined that Edward V.
Regan, the Chairman of the Board's Audit Committee, possesses the technical
attributes identified in Instruction 2(b) of Item 3 to Form N-CSR to qualify as
an "audit committee financial expert," and has designated Mr. Regan as the Audit
Committee's financial expert. Mr. Regan is an "independent" Trustee pursuant to
paragraph (a)(2) of Item 3 to Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not applicable to semiannual reports.
ITEM 5. NOT APPLICABLE
ITEM 6. SCHEDULE OF INVESTMENTS
Not applicable
ITEM 7. NOT APPLICABLE
ITEM 8. NOT APPLICABLE
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At a meeting of the Board of Trustees of the registrant held on
February 18, 2004, the Board adopted (1) a policy that, should the Board
determine that a vacancy exists or is likely to exist on the Board, the
Governance Committee of the Board, which is comprised entirely of independent
trustees, shall consider any candidates for Board membership recommended by the
registrant's security holders and (2) a policy that security holders wishing to
submit a nominee for election to the Board may do so by mailing their submission
to the offices of OppenheimerFunds, Inc., Two World Financial Center, 225
Liberty Street - 11th Floor, New York, NY 10281-1008, to the attention of the
Chair of the Governance Committee. Prior to February 18, 2004, the Board did not
have a formalized policy with respect to consideration of security holder
nominees or a procedure by which security holders may make their submissions. In
addition to security holder nominees, the Governance Committee may also consider
nominees recommended by independent Board members or recommended by any other
Board members and is authorized under its Charter, upon Board approval, to
retain an executive search firm to assist in screening potential candidates.
Upon Board approval, the Governance Committee may also obtain legal, financial,
or other external counsel that may be necessary or desirable in the screening
process.
ITEM 10. CONTROLS AND PROCEDURES
(a) Based on their evaluation of registrant's disclosure controls and
procedures (as defined in rule 30a-2(c) under the Investment
Company Act of 1940 (17 CFR 270.30a-2(c)) as of March 31, 2004,
registrant's principal executive officer and principal financial
officer found registrant's disclosure controls and procedures to
provide reasonable assurances that information required to be
disclosed by registrant in the reports that it files under the
Securities Exchange Act of 1934 (a) is accumulated and
communicated to registrant's management, including its principal
executive officer and principal financial officer, to allow timely
decisions regarding required disclosure, and (b) is recorded,
processed, summarized and reported, within the time periods
specified in the rules and forms adopted by the U.S. Securities
and Exchange Commission.
(b) There have been no significant changes in registrant's internal
controls over financial reporting that occurred during the
registrant's last fiscal half-year that has materially affected,
or is reasonably likely to materially affect, the registrant's
internal control over financial reporting.
ITEM 11. EXHIBITS.
(A) EXHIBIT ATTACHED HERETO. (ATTACH CODE OF ETHICS AS EXHIBIT)
(B) EXHIBITS ATTACHED HERETO. (ATTACH CERTIFICATIONS AS EXHIBITS)